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How Important is the Intermediate Input Channel in Explaining Sectoral Employment Comovement over the Business Cycle?

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Author Info
Young Sik Kim (Seoul National University)
Kunhong Kim
Abstract

This paper investigates both analytically and quantitatively the role of intersectoral linkages in explaining sectoral employment comovement over the business cycle. We use a multisector dynamic stochastic general equilibrium model calibrated to the 2-digit SIC level intermediate input-use and capital-use tables and sectoral productivity shocks. With indivisible labor implying constant marginal utility of leisure, intersectoral linkages at the disaggregated level generate strong employment comovement across sectors. With divisible labor, however, procyclical marginal utility of leisure can dominate intersectoral linkages, implying some negative comovement. It further requires some form of the difficulty in reallocating labor across sectors, so that the substitutability of labor supply across sectors is relatively low. With divisible labor, a limited substitution of labor hours across sectors is shown to generate strong employment comovement over the business cycle. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2006.06.002
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 9 (2006)
Issue (Month): 4 (October)
Pages: 659-682
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Handle: RePEc:red:issued:04-11

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  3. Hornstein, Andreas & Praschnik, Jack, 1997. "Intermediate inputs and sectoral comovement in the business cycle," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 573-595, December. [Downloadable!] (restricted)
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  4. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November. [Downloadable!] (restricted)
  5. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: U.S. Economic Growth in the Information Age," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(2000-1), pages 125-236. [Downloadable!]
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  6. Jess Benhabib & Richard Rogerson & Randall Wright, 1991. "Homework in macroeconomics: household production and aggregate fluctuations," Staff Report 135, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  7. Huffman, Gregory W. & Wynne, Mark A., 1999. "The role of intratemporal adjustment costs in a multisector economy," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 317-350, April. [Downloadable!] (restricted)
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  8. Horvath, Michael, 2000. "Sectoral shocks and aggregate fluctuations," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 69-106, February. [Downloadable!] (restricted)
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  11. Finn Kydland & Edward C. Prescott, 1980. "A Competitive Theory of Fluctuations and the Feasibility and Desirability of Stabilization Policy," NBER Chapters, in: Rational Expectations and Economic Policy, pages 169-198 National Bureau of Economic Research, Inc. [Downloadable!]
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  15. McLaughlin, Kenneth J & Bils, Mark, 2001. "Interindustry Mobility and the Cyclical Upgrading of Labor," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 94-135, January. [Downloadable!] (restricted)
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  16. Andreas Hornstein, 2000. "The business cycle and industry comovement," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 27-48. [Downloadable!]
  17. Geary, Patrick T & Kennan, John, 1982. "The Employment-Real Wage Relationship: An International Study," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 854-71, August. [Downloadable!] (restricted)
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  1. Holly, Sean & Petrella, Ivan, 2009. "Factor Demand Linkages, Technology Shocks and the Business Cycle," MPRA Paper 18120, University Library of Munich, Germany. [Downloadable!]
  2. Sean Holly & Ivan Petrella, 2008. " Factor demand linkages and the business cycle: interpreting aggregate fluctuations as sectoral fluctuations," CDMA Conference Paper Series 0809, Centre for Dynamic Macroeconomic Analysis. [Downloadable!]
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